Accounting And Fiscal Implications Regarding The Vat Code Withdrawal Caused By Inactivity

The objective of this article is to analyze the accounting and tax implications caused by the ex officio declaration by National Tax Administration(N.T.A.) of taxpayers in Romania as inactive, wich implicitly implies the withdrawal of the VAT code. In this respect, we will look at the effects of inactivity throughout the entire period since the VAT code was canceled and until taxpayers who were automatically declared inactive are still carrying out economic activities were re-registered for VAT purposes and, once the situation leading to automatically canceling the VAT code, were reactivated. We will therefore present what is the expenses and value added tax regime during the inactivity period and after reactivation, what are the obligations of the taxpayer after reactivation and re-registration for VAT purposes, as well as related accounting records. The structure of the article includes the following main sections: the first part briefly presents the reasons for the ex-officio cancellation of the VAT code for entities from Romania, respectively the cancellation of the VAT code; the second part includes analysis of VAT accounting and fiscal implications for suppliers and beneficiaries; the third part encompasses the analysis of the fiscal implications for the expenses regime during the inactivity period and after the reactivation, and the last part will include the conclusions, recommendations and limits of the research. We conclude that the ex officio declaration of inactivity by the N.T.A. implies a change in the expenses and VAT regime for both suppliers and beneficiaries for the purpose of prohibiting the right to deduct VAT and the costs of purchases made from inactive taxpayers or during inactivity, respectively by forcing the entity declared inactive to collect VAT and to pay tax on earnings. These implications are particularly important for the smooth operation of the business and influence cash flow, profitability and a number of other indicators for both suppliers and beneficiaries.